(Bloomberg Opinion) -- Watching equities rally strongly for a second consecutive day, pushing the S&P 500 Index at one point to its highest level since March 11, it was hard not to be reminded of one of the most famous lines in movie history, or at least among fans of the Star Wars franchise. In 1983’s “Return of the Jedi,” the rebel alliance mobilizes its forces to destroy the Death Star during the Battle of Endor. But the rebels get ambushed, prompting Admiral Gial Ackbar to shout “It’s a trap!” And, just like that, equities gave up all their gains on Tuesday to post a slight decline.

At its highest point on Tuesday, the S&P 500 was up 23% to 2,757 compared with last month’s closing low of 2,237 on March 23. The two main reasons given to explain the rebound are optimism that officials may be getting ahead of the curve in the battle to contain the coronavirus pandemic and what looks to be deeply discounted valuations on stocks following the fastest drop into a bear market in history. It remains to be seen whether Covid-19 is coming under control. When it comes to valuations, though, the optimists may well have fallen into a trap. A value trap is a well-known phenomenon in markets. It happens when a security or asset appears inexpensive relative to any number of metrics. The trap springs when the price of the security or asset continues to languish or drop even further. Indeed, stocks did look cheap, with the S&P 500 going from trading at close to 20 times this year’s estimated earnings down to 14 on March 13, which was the lowest since early 2013, according to data compiled by Bloomberg. But that was before analysts starting cutting their 2020 profit estimates, dropping them to $152 a share from $175 at the end of January. As a result, stocks no longer look so cheap, with the S&P 500’s price-to-forecasted earnings multiple jumping up to a not-very-inexpensive 18 times. The problem is that many analysts have held off slashing their profit estimates, deciding to wait until they hear from company executives when the first-quarter earnings reporting season begins in a few weeks. In other words, get ready for earnings estimates to fall even further, which should weigh on sentiment and valuations.

Bloomberg News reports that Keith Parker, UBS AG’s head of equity strategy, calculates that many firms hadn’t updated their forecasts on individual company earnings for weeks. That means the existing data covering the next 12 months are probably underestimating the scope of the decline in S&P 500 profits by a factor of 2. The 2008 bear market had a number of false starts, with the S&P 500 rallying about 18% between late October and early November, and 24% between late November and early January, before tumbling again by about 25% before finally bottoming at a 13-year low in March 2009.

DEBT RULES THE WORLDGovernments globally are stepping up their debt issuance to raise cash to support their economies during the coronavirus pandemic. There’s no shortage of market participants who expect all this money flowing into the system will set the stage for a sharp rebound in global growth once the crisis passes. Perhaps they should review a famous paper written a decade ago by economists Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff that argued economies with high debt potentially face “massive” losses of output lasting more than a decade, even if interest rates remain low. What’s concerning is that debt issuance showed no sign of slowing before the pandemic. The Institute of International Finance issued a report Tuesday saying that the mountain of global debt across all sectors rose by more than $10 trillion in 2019 to exceed $255 trillion. That tops 322% of global gross domestic product, rising from 282% at the onset of the 2008 financial crisis. The IFF estimates that if global economic activity contracts 3%, debt would exceed 342% of GDP this year based on net government borrowing for 2019. The question is whether all this government borrowing will begin to crowd out private borrowers, sending interest rates soaring for all but the safest debt. That would be another reason to not expect a sharp economic rebound.

AN EMERGING-MARKET TRAGEDYEmerging markets have accounted for a greater percentage of the global economy over the last decade, and that’s before considering the tremendous growth in China. What’s concerning for investors is that their health-care systems continue to lag behind those in developed markets, raising questions about their ability to handle the coronavirus pandemic. Among the top 25 health systems in the world as measured by the Johns Hopkins Global Health Security Index, only four are in emerging-market economies: Thailand at six, Malaysia at 18, Brazil at 22 and Argentina at 24. “As bad as the coronavirus crisis is likely to be in the world’s wealthiest nations, the public health and economic blow to less affluent ones, often referred to as ‘developing countries,’ could be drastically worse,” the analysts at Eurasia Group wrote in a note to clients. “They have less testing capability, fewer hospital beds, and lower stocks of ventilators and other specialized equipment. There are also far fewer doctors per capita.” Eurasia adds that while governments and central banks in the rich world can unleash stimulus packages that run into the trillions of dollars, developing countries have much less financial firepower, and their borrowing costs are also higher. Investors have already pulled $90 billion out of emerging markets since mid-January, helping to push the MSCI Emerging Markets FX Index down 5.67% for the year, raising problems such as faster inflation that can accompany a weakening currency.

THE WRONG KIND OF INFLATIONThe market for raw materials hasn’t been spared from the coronavirus pandemic, with the Bloomberg Commodity Index falling about 22% in 2020, dropping to its lowest level since the 1970s. But the commodities market is wide, and not all sectors move in lockstep. Prices are rising for rice and wheat, which account for about a third of the world’s calories, according to Bloomberg News. The increased costs are a double whammy for a global population that faces a worldwide recession, with many either already out of work or soon to be. In Nigeria, for example, the cost of rice in retail markets soared more than 30% in the last four days of March alone. According to Bloomberg News, it’s unclear whether the price increases are the result of a trickle-down effect from grain futures or local logistical choke points or panic buying, or some combination of those factors. Elsewhere, export prices for rice from Thailand, the world’s second-biggest shipper, are at a six-year high. Wheat futures in Chicago, the global benchmark, shot up more than 8% in March, while Canadian durum, the type of grain used in pasta and couscous, is at the highest since August 2017. Bloomberg News points out that staple-crop prices have a long history of fueling political instability. During the spikes of 2011 and 2008, there were food riots in more than 30 nations across Africa, Asia and the Middle East.

TEA LEAVESWhat were they thinking? Market participants will find out Wednesday when the minutes of the Federal Reserve’s emergency meeting on March 15 will be released. To refresh, that’s when the central bank slashed its benchmark interest rate by a full percentage point to near zero and promised to boost its bond holdings by at least $700 billion, the first of several moves announced by the Fed in the weeks that followed to support the financial system during the coronavirus pandemic. Although the minutes will be dated, Bloomberg Economics notes that they will “provide some context of policy makers’ thinking at the onset of the crisis.” More specifically, the minutes may shed some light on whether Fed officials anticipated the depth and breadth of the shock from shutting the economy down or whether they were taken by surprise like the government.

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This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.

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